The house that labour built

As Labor digs in to protect the status quo, Tony Abbott is preparing to take unions to the scaffold.

The grim news this week of systematic thuggery and criminality on building sites confirms three facts of life in Australia.

First, that the quarter-trillion-dollar-a-year construction industry has returned to business as usual a decade after the Cole royal commission found an "urgent need for structural and cultural reform".

Illustration: Rocco Fazzari

Second, that Labor has unlearnt everything it used to know about being a broad political party and has retreated to being a narrow sectional one. Labor under Bill Shorten is defending the indefensible in the construction industry in an effort to protect malfeasance in the construction union.

Third, that the Coalition is prepared to tackle the problem in the building sector, but that deep in its genes it is determined to wage a much bigger confrontation with the union movement.

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It begins with the building industry. The Abbott government will reconstitute the extraordinary body that the Howard government created to attack criminality in the industry, the Australian Building and Construction Commission.

Labor went to the elections of 2007 and 2010 supporting the ABCC, recognising that it was doing important work to improve productivity and lawfulness. But it was cut short seven years into its campaign to clean up the sector.

When the construction union asked then prime minister Julia Gillard to abolish the ABCC, she obliged, "to protect her own arse", as one of her cabinet ministers put it. The unions were Gillard's internal power base against Kevin Rudd.

Today Labor and the Greens, both recipients of donations from the construction union, are combining in the Senate to block the return of the ABCC. They are using unconventional tactics, with multiple referrals to various Senate committees, to delay a vote on the government's bill.

What's wrong with Labor's position? It says that, if there are allegations of criminality in the building industry, police should investigate in the normal course of enforcing the law. There's no need for a special body or a royal commission. This seems reasonable, but it is, in fact, a pretext for preserving the status quo.

How? The police and other enforcement authorities are notoriously reluctant to pursue investigations into the building industry. The ABCC commissioner from 2005 to 2010, John Lloyd, now the Red Tape Commissioner for the Victorian government, explained:

"Traditionally there's been a shrug of the shoulders" among the enforcement authorities. "The attitude is, 'that's the way the industry is, it's a tough industry, and we don't want to get involved'.

"And people in the industry don't want to talk. There's a code of silence. If you're seen to be co-operating, you are subject to reprisals against your business or against yourself."

He knows. The ABCC under Lloyd brought more than 90 civil cases for breaches of industrial law, and it enjoyed a success rate in the courts of 85 per cent. But it also referred to the police and other enforcement authorities 39 cases of suspected criminal conduct. Lloyd is today aware of none that was pursued.

The ABCC might have been able to follow up and jog the police into action, but its premature demise means that it didn't get the chance.

Labor and the Greens can protect the construction union, the CFMEU, only until July 1, when the new senators take their seats. Abbott is very likely to prevail in the new Senate. The new ABCC will then be empowered to clean up the industry.

It will be commissioned to police the unions but also the employers - for every union official taking a payoff there is a company making a payoff. Collusion is at the heart of the problem.

At the same time, the Abbott government will have ready a royal commission into corruption in the union movement.

This is where the horizon broadens dramatically, from one sector to all sectors; where the Coalition's deep DNA asserts itself, and where the big confrontation looms.

This was an opportunity created by the conduct of some of the unions and their officials and Labor itself. Three major stories of union corruption ran for most of Labor's term in office. One was the misuse of union funds by then Labor MP Craig Thomson when he was an official at the Health Services Union. Another was the flagrant corruption and greed of Michael Williamson when he was an official at the HSU and simultaneously national president of the Labor Party. Third was the revisiting of the slush fund and misappropriation of money by Bruce Wilson when he was an official of the Australian Workers Union and boyfriend of Gillard.

In opposition, Abbott capitalised on these union scandals to promise a judicial review of the misuse of union funds, if elected. He was elected. This judicial review is to be a royal commission, planned to be announced in the next few weeks.

Public opinion has already been prepared, largely by the corrupt union officials and the publicity their cases received over the past five years. "When you say 'unions' to focus groups, they think 'workers'," says a Coalition strategist with access to the party's research. "When you say 'union officials' to focus groups, they think 'cheats, grubs and corruption'. That's why we always say 'union officials' - it's a very pejorative term. The public is with us."

But the Abbott government wants to wait a few weeks more before announcing the royal commission. Why? Because every day's news is bringing the problem home to the public.

"Before you give the punters a solution, they have to understand there's a problem," says the strategist. "The more attention on this in public, the more we're seen to be responding to a problem, not running an ideological exercise."

The problem is certainly real, especially in the construction sector. Lloyd says that in the life of the ABCC, "the industry's conduct improved, although I don't think the culture did, and now my impression is that the conduct has deteriorated again. I'm surprised to see that bikie gangs appear to be entrenched now, from the news reports."

A former royal commissioner into the NSW construction sector in the early 1990s, Roger Gyles, seems to agree: "The sorts of problems that I saw, that [Royal Commissioner Terence] Cole saw, are not only re-occurring but apparently may be at a more serious level with the involvement of bikies," he told The Australian this week. "The problem is there seems to be no effective action by anybody." And the industry is vastly bigger now. Since the first incarnation of the ABCC in 2005, the annual value of construction sector turnover, excluding housing, has grown fivefold to $262 billion in 2013-14, IBIS World says.

But while the Abbott government will seek to address real problems, its larger response through a royal commission and other measures is also deeply ideological.

The royal commission's terms of reference will be wide. It will be mandated to examine not just the unions that have drawn recent publicity for their corrupt practices, the HSU and the CFMEU in recent years and the AWU in the Wilson era, but the entire union movement.

And the government will ask it to look at corruption widely defined, including misuse of members' funds. The government has a shortlist of candidates to conduct the royal commission. The main criterion is that it's a "kick-arse commissioner", according to a person involved in the decision.

The Abbott government hopes and trusts the royal commission will set off a three-year internecine war pitting union against union. "It'll be every union for itself," says a strategist. "There's nothing better than that."

The intention is to allow the union movement to damage itself. One result would be to weaken the institutional basis of the Labor Party.

The Abbott government has learnt from the mistake of the Howard government. It plans to carefully fillet the workplace to separate workers' pay and conditions from the unions. The workers are to be unaffected. The target is the union organisations. Abbott, inoculating himself against the inevitable Labor accusation that he wants to attack workers' pay, this week repeated his pledge that he wants Australian workers to be "the best paid workers in the world". On most comparisons, they already are.

In the meantime, the government will have the Productivity Commission reviewing the workplace system and producing recommendations for reforms.

These recommendations could very well affect workers' pay and conditions, but Abbott has promised that he will take to the next election any changes that he might propose to workplaces and working conditions.

So it's a two-term process. First, attack the unity and the power of the unions. Second, consider changes to the workplace.

And while the second term is still a long way off, the ultimate aim of the government was set out in a landmark speech this week by Abbott's Industrial Relations Minister, Eric Abetz:

"We are still yet to complete the process identified by Gerard Henderson," head of the Sydney Institute and former Herald columnist, "in 1983 of transforming the award system from a prescriptive means of regulating the workforce to that of a simple safety net above which economic reality can prevail".

Abbott's is not the first government to propose this goal. Paul Keating set out his aim for a system that puts "primary emphasis on bargaining at the workplace level within a framework of minimum standards provided by arbitral tribunals. It is a model under which … awards … would be there only as a safety net.

"Over time, the safety net would inevitably become simpler," Keating said. "We would have fewer awards, with fewer clauses."

Abetz embraced the Keating vision: "To this end I am on a unity ticket with Mr Keating."

The construction industry needs to be cleaned up, but we now see the Abbott vision extends far beyond.

Peter Hartcher is the political editor and international editor of The Sydney Morning Herald. He is a Gold Walkley award winner, a former foreign correspondent in Tokyo and Washington, and a visiting fellow at the Lowy Institute for International Policy.